New name reflects broad care commitment
With a new moniker designed to reflect its broader commitment to health care, CVS Health is “positioned for today, preparing for tomorrow,” executives told Wall Street during its 2014 Analyst Day in December.
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“We expect that reform and demographic changes will increase the number of [insured] lives, and that will provide a long-term secular tailwind for the industry,” Larry Merlo, president and CEO of CVS Health, told analysts.
For 2014, total revenue in the pharmacy services segment increased 16.170 to $88.4 billion, fueled in part by specialty pharmacy, including the acquisition of Coram and the impact of CVS Health’s Specialty Connect offering rolled out in May 2014. Like Maintenance Choice, Specialty Connect connects mail and retail to provide choice and convenience for members.
For 2015, the company expects to generate roughly $37 billion in specialty revenues, up from an estimated $31 billion in 2014, Merlo explained.
CVS Health’s integrated PBM offerings are not only resonating with payers and translating into a growing list of new healthcare alliances, but the PBM business model has afforded the company a lever to help offset lost sales at retail, following its decision last year to pull the plug on all tobacco sales.
Despite the tobacco headwind, the impact on front-end sales was less than company executives anticipated and resulted in “no discernible” impact on its pharmacy business, the company stated in February.
The bold move to exit speaks to CVS Health’s larger mission as a health-and-beauty destination. Health and beauty has grown rapidly for the company with overall sales up more than 3070 over the past five years.
“Looking ahead, there are significant health-and-beauty opportunities we can tap into in the drug channel. Our market is poised between two worlds: the convenience sphere, which is the quick foods and general merchandise we sell, and the destinations sphere, which is all the health-and-beauty products that people associate with a drug store,” Helena Foulkes, EVP and president of CVS/pharmacy, told analysts.
Foulkes said the company has outlined five strategic themes to drive growth:
Better health made easy
Elevate beauty
Customer-driven personalization
MyCVS store
Digital innovation
As part of the strategy, the company is looking to deliver a better in-store experience and showcase its healthcare expertise. For example, it is expanding OTC and making it an integral part of adherence and post-care support.
CVS/pharmacy also is bolstering its selection of on-the-go healthy food.
Beauty will get a facelift with exclusive offerings and enhanced merchandising. Over the next year, shoppers will see an upgraded cosmetics wall in many stores, a stepped up facial care look and feel, endcaps dedicated to beauty elevation, and an increased focus on naturals and healthy solutions.
“Our very best stores are going to get the full effect and a total revamp with all of the above and much more,” Foulkes told analysts.
The company also is leveraging Minute-Clinic in beauty, offering, for example, eyelash lengthening consultations and services.
The company’s MinuteClinic business operates 960 clinics, and over the past two years has opened more than 340 clinics, while entering 20 new markets. The goal is to operate 1,500 clinics by 2017.
In addition to the ongoing clinic growth, the company also is expanding its scope of services. Along with preventive and acute care services, MinuteClinic also is looking to provide chronic condition monitoring and various wellness programs.